Carrot equity

Carrot equity

Carrot Equity

The right of a shareholder to purchase more shares in a publicly-traded company if the company's performance reaches a certain benchmark. If the company's performance outpaces expectations or reaches a stated level (for example, if its net income or operating income reaches a certain amount) the holders of carrot equity may purchase more shares. Carrot equity operates much like a call option, but it is given automatically and the shareholder need not buy it. Carrot equity is designed to give shareholders a vested interest in the company's medium or long-term performance.

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